As the asset management industry continues to expand, many fund managers find themselves lacking the proper infrastructure and processes to keep up with regulatory and compliance requirements, especially those with already limited resources.
Fund management is responsible for selecting intermediaries, conducting due diligence, and ongoing management of a fund’s intermediary relationships. For the fund, managing complex intermediary relationships is a team effort. And like any team, success can often depend on a strong bench, which for firms can mean implementing third-party solutions into their lineup.
Senior personnel from several areas—often including compliance, fund management, fund distribution, the transfer agent, and other operational areas—interact with intermediary counterparts to oversee adherence to regulatory, prospectus, contractual, and other fund-mandated obligations.
Because oversight activities are not static and must evolve with regulatory and business environment changes, these parties decide the best way to monitor the activities of the intermediary and determine which oversight tools are most appropriate based on their funds’ circumstances.
Challenges of Intermediary Oversight for Asset Managers
As oversight responsibilities continue to expand, budget pressures demand that activities become more efficient, particularly for small or mid-size firms whose resources may be stretched thin.
Currently, many firms are juggling disparate systems, and they’re left trying to figure out a way to consolidate all these for the purpose of more timely and accurate reporting. These disparate systems, with data elements spread across multiple platforms, lead to time-consuming processes in order to produce board and management reports
Funds are forced to spend large amounts of time collecting and reviewing intermediaries’ audit documents, while physical documents and other labor-intensive processes hinder efforts to streamline workflows.
Without an automated solution and comprehensive oversight platform, firms are weighed down by inefficiencies caused by manual logging of expected invoices and manual tracking of pending intermediary agreement changes with Excel spreadsheets and pivot tables. Inadequate audit capabilities prevent easy access to historical records with all data points, tasks, and transactions, which inhibits timely board and management reporting.
These challenges related to intermediary oversight constrain a firm’s resources with tasks that could be outsourced and managed by industry experts.
Importance of Efficient & Effective Oversight Program
A fund’s intermediary oversight program must satisfy the requirements of SEC Rule 38a-1, which requires that the fund have policies and procedures to oversee the compliance of its intermediaries.
Ongoing monitoring methods include employing risk-based assessments of each intermediary, circulating periodic questionnaires regarding operational and compliance practices, and evaluating the quality of data transparency files.
Additional ongoing oversight functions increase transparency and provide assurances regarding the intermediary’s controls by obtaining underlying transaction data for broker-dealer omnibus accounts. These data elements are related to compliance with SEC Rule 22c-2 addressing frequent trading activities.
Adhering to mounting regulations and monitoring exorbitant amounts of data is a daunting task for any asset management firm, particularly for those that rely on manual processes and multiple data systems
Fund boards have a high interest in intermediary oversight as well as how that oversight operates, which is why it’s critical for funds to have integrated and cohesive processes in place to pull together all the data. Most funds have quarterly reporting to the fund boards with more extensive reporting through their annual 15(c) Review Process, as well as ad hoc internal management and operational reporting.
From a reporting perspective, having accurate and timely data available within tools that can be utilized with ease is critical. Consolidating disparate data systems into a single platform allows for more timely and accurate reporting.
Automated solutions reduce the inherent risk that comes with manual processes, freeing personnel to focus on more strategic, value-added work while maximizing distribution of the firm’s resources.
Intermediary Oversight Essential Solutions Set
A comprehensive solution set of fee management, relationship and counterparty management, reporting and analytics, and managed services enables firms to scale up their intermediary oversight program with efficient implementation while future-proofing back-office processes and workflows.
Funds have integrated access to robust data at their fingertips, which is easily obtainable within a consolidated platform and easy to navigate. Implementing an off-the-shelf solution that’s focused on oversight, like that offered by Delta Data, is a viable and economical direction for asset managers.
Delta Data’s expertise in developing fully integrated technology solutions allows asset managers and investment firms of all sizes to manage their intermediary oversight program more efficiently so they can concentrate on maximizing returns and maintaining full compliance while minimizing risk and scaling efficiently.
Contact us to learn how Delta Data’s Intermediary Oversight solutions streamline operations, reduce manual entry, automate workflows, and enhance accuracy, freeing fund management teams to focus on strategic, value-added activities.